Under New Labour the population increased due to immigration and an ageing population but they deliberately restricted house building effectively pricing a generation out of home ownership.

Don’t get me wrong – I am a fervent supporter of immigration. Labour markets should be as free as all others should be free. More pressingly this country has a Welfare State structured like a ponzi scheme. Ergo, without immigrants over the age of 21, or the massive fundamental overhaul of the Welfare State that this government has neither the courage nor the appetite to follow through, services as most know them will cease to exist.

With two healthy Graduate salaries, my boyfriend and I can not afford the house my father could afford on a single salary at the same age. He had no degree and a wife and two children at the time. I feel more privileged than my parents in every other way and I know we’re better-off than a great many people our age. So if we’re struggling with our housing situation then I know a lot of people are too.

Stop blaming immigrants; they’re not the problem. The price of houses is directly linked to lack of supply. Had bread increased in price at the same rate as house prices, a loaf would cost just under £5. I’m pretty sure if bread were in such short supply that it was this expensive there’d be riots in the streets. There are millions of houses that do not exist thanks to continually piss poor housing policy since the end of WWII.

Alas, things look like they’re going to continue. The Help-to-Buy scheme is the policy equivalent of “You have been diagnosed with full-blown AIDS – take two aspirin and get a good nights rest.” Cheap mortgages are little comfort when the houses we need simply don’t exist.

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5 Responses to “New Labour’s Cruel Housing Legacy”

If house prices increase at a steady rate, and never fall or wobble, politicians keep everybody happy – home owners because their investment is increasing in value, and first time buyers who can never do any wrong in buying, because they won’t be buying at the top of the market.

Politicians aren’t economic miracle workers (much as they pretend they are). But they have one big tool at their disposal – never committing to increasing supply. And this is really good, it doesn’t upset NIMBYs.

There are a few residual problems. Deposits will keep going up. So you make mortgages easier to get, such as with the help-to-by scheme or sub-prime. Nothing can go wrong there.

Another problem is that housing benefit will increase faster than tax revenues grow. But that’s a long-term problem, and you can have a few political plasters along the way, such as the ‘bedroom tax’.

Worried about the long-term sustainability? Don’t be – as a politician your horizon is one term, and the problem will be with the set of politicians who are in power when the music stops, and if that happens they’ll have a big political mandate to get the music playing again as soon as possible.

The average number of new homes built in the decade to 2008 was 160,000. The current rate is atypically low; extrapolating the 2012 figure to produce a decadal figure is shoddy.

Against this, the rate if new household formation is 250,000/year. In fact, demand has been outstripping supply for three decades.

The supply of developable land strongly correlates with house prices over the long run. The money supply may stimulate short-run booms and busts but over time the solution to the house-price crisis is building more houses. No party is good at this, though at least the Lib Dems aim for 300,000 new homes a year, which is on the right side of the argument.

The UK savings rate has fallen sharply in recent years yet the housing market is rising again. The availability of cheap money for mortgages, as well as the spectre of hyperinflation, cash savings erosion and bank bail-ins makes property a logical choice for many.

At the same time the bottom of the market is propped up by help-to-buy and housing benefit.

Regardless most people in the UK are living somewhere.

If housing benefit was scrapped and a single basic income brought in, at the same time as sorting out the banking crisis (move to bitcoin economy anyone?!) then housing costs as a proportion of income would fall.

The current system leads to working families being priced out of all rental and mortgaged housing, whilst those out of work have no incentive to earn any money at all lest they lose all their benefits. A true poverty trap of our own making.